When billionaire businessman and owner of the Los Angeles Times, Patrick Sion opened a $250 million vaccine facility in Cape Town in 2022, he was asked by mayor Jordyn Hill Lewis why he chose the Western Cape capital.
After all, Soon-Shiong, a South African-born US citizen and entrepreneur, grew up in Port Elizabeth and studied at the University of Witwatersrand in Johannesburg, and built a business empire in California.
“His momentary response is, ‘It’s a university. We need a steady supply of young scientists and engineers, and we can get them in Cape Town,” Hill Lewis adds, recalling his meeting at the vaccine facility’s inauguration event attended by Cyril Ramaphosa in South Africa. “I thought that was a great statement.”
Like the University of Cape Town, the city frequently ranks the highest on the continent, and has other respected institutions of higher education, including Cape Peninsula Institute of Technology and the Western Cape University, climbing the streets of Stellenbosch University.
Like the Cambridge-Oxford cluster in Boston, the UK and the US, the concentration of universities in Cape Town allows doctoral degrees and other research to be spun into businesses, making African cities one of Africa’s most important startup hubs.
One example is H3D, an integrated drug discovery center founded by Kelly Chibare, a professor of Zambian organic chemistry at the University of Cape Town.
In 2017, H3D became the continent’s first research center, including “African Drugs” (antimaralia) in Phase II clinical trials. Last year, 75 researchers had earned their PhDs before the medical research funding environment was hit by cuts from the US International Development Agency and the National Institutes of Health.
Cape Town also benefits from wider South African trends. South Africa flocks to cities known for its wealthy people, industrial centres and poor people in the Eastern Cape, known for having better infrastructure and services than the country’s economic capital, Johannesburg.
It brings problems like pushing rent and housing prices up, but it also adds to the cluster effect of Cape Town. Among these changes are banks and other financial institutions, increasing numbers of staff moving their headquarters to Cape Town or into the city.
“As the South African financial services industry is moving to Cape Town, there is a growing ecosystem of venture capital finance here, which I think supports the technology and startup ecosystem,” says Hill Lewis.
Mia von Koschitzky-Kimani, a partner at Future Africa, investing in early startups, recently moved from Nairobi to Cape Town in search of investment opportunities. She says her first impression of the city’s emerging scene is that it is very different from that of Kenya and Nigeria.
In South Africa, many of the founders are white and have black South Africans – excluded from business opportunities under racist apartheid law for a very long time – prefer to work in the public sector or established companies. Her prediction is that black-owned startups struggle to access international capital that doesn’t necessarily target South Africa, a country that is more conceptually richer than most of Africa.
Another difference is that while Nigerian startups are mostly created to solve logistics, finance and daily life problems in Nigeria, many companies in Cape Town are working on the international market, says Koshitsky Kimani. Some of the pitch decks she received are technically very sophisticated, she adds, showing a certain level of skill and ambition to solve global problems.
“The typical South African entrepreneurs are building for South Africa or thinking about the world outside of Africa,” she says. “They think Mexico may be closer to South Africa than Lagos, and in some respects they may be right.”
Cape Town also has a relaxed lifestyle and world-class vineyards close to the mountains and the ocean, which also benefit from the trends of digital nomads. The South African government recently lowered the minimum visa income threshold. This allowed applicants to be based in the country for up to three years, but many remote workers simply entered the country as tourists.
“A lot of people are here for six months a year if the weather is good, but there are teams elsewhere in the world,” says Koschitzky-Kimani. “We haven’t seen that in Lagos, and a little in Nairobi.”
Opus, the founder community of “From Idea to Series A,” was also founded in Cape Town and Johannesburg. Opus’ South African leader Jono More says the barriers to entry into startups have been significantly reduced, particularly due to advances in artificial intelligence.
“There’s definitely a big entrepreneurial talk in Cape Town,” he says. “But it’s very difficult to get funding. You can’t knock on the door and get a meeting.”
He met dozens of businesses in both Cape Town and Johannesburg, from fintech to black soldiers diving into pet food. “It’s a very diverse group,” he says, pushing back the idea that founders are almost white. “There are all life courses, all colours, ethnicities, religions, genders,” he says. “They call us Rainbow Nation. I’ve witnessed it firsthand.”
